Short-time work (STW) is a job retention scheme in Germany that allows employers to reduce employees' hours and wages during economic downturns. The government covers 60-87% of lost wages to avoid layoffs. Regulations were adjusted for COVID-19, extending coverage to 24 months and increasing wage replacement rates. Data shows STW use peaked at 35% of establishments but has since declined to 21% as some crisis measures end. STW is aimed at retaining skilled workers until demand returns while supporting retraining to address structural changes like digitization.

1. SHORT-TIME WORK IN GERMANY:
DYNAMICS AND REGULATIONS
OECD-IAB Webinar
Job retentions schemes during the Covid-19 lockdown and byond
26th November 2020
Prof. Dr. Lutz Bellmann
Anke Jenckel LL.M. (Exon)

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Without this instrument:
• The employer has to pay, even if he does not have any work or
not enough work to keep his employees busy
• In case of crisis this might lead to bankruptcy and the loss of all
jobs.
WHAT EXACTLY IS SHORT TIME WORK (STW)?
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• safe jobs,
• safe the company,
• keep skilled employees with their employer,
• which ensures, the employer can start as soon as there is work to do
with his skilled and experienced staff and spares him to hire and train
new employees once the crisis is over.
THE UNEMPLOYMENT INSURANCE COVERS THESES RISKS IN
ORDER TO:
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• STW does not leverage the usual economical responsibility and risks of
employers.
• Each month, STW is used, there must be:
a substantial work shortage,
caused by economical reasons or unavoidable circumstances,
transitory,
unavoidable for the employer,
affecting at least 1/3 of the employees with at least 10% loss of wage.
WHAT ARE THE PREREQUISITES?
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Anyone, who paid Social Security Contributions to the Unemployment
Insurance, if his employer has at least a branch office in Germany.
Yes: full and part-time employees, no matter whether the labour contract is
indefinite or of limited duration
apprentices
No: employees of a „Mini-Job“ (€ 450,00)
temporary employees (there is an exemption during this crisis)
solo self-employed persons
WHO CAN BENEFIT FROM STW ALLOWANCE?
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• Employer and employees agree: employees will not claim their wages, if there is a loss of
work (this might be done by a collective agreement, by an agreement between the
employer and the works-council or on an individual basis). Apart from that the work-
contract stays in force.
• The employer gives notice to the local branch of the Federal Employment Agency (BA),
that there is a loss of work, and shows, that the legal requirements to claim STW allowance
are met.
• As much work as there is will be done: total flexibility!
• At the end of the month, the employer will pay the wages for the hours the employee has
actually worked and will advance the STW allowance (60/67% of the net wage) for the time
of no work. This later will be reimbursed to him by the BA.
• Furthermore, the employer has to pay for 100% of the Social Security Contributions
(Health, Pension, Care) for the STW share.
HOW DOES STW FUNCTION?
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• Extension of the period during which the STW allowance can be paid from
12 months for up to 24months ending 31 Dec. 2021 at the latest only for
those establishments that have introduced STW by 31 Dec. 2020,
• Full reimbursement of social insurance contributions until June 2021,
followed by reimbursement of half of the amount until 31 Dec. 2021
• Increased STW allowance only for employees as from the 4th month to
70/77% and from the 7th month to 80/87%, if the loss of work is at least
50% and STW has been introduced by 31 March 2021,
• Possibility of supplementary earnings up to normal paylevel until 31 Dec.
2020, to be continued for marginal employment (€ 450) until 31 Dec. 2021.
ADJUSTMENTS IN VIEW OF THE COVID-19 PANDEMIC
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• As there is a strong undercurrent transformation with respect to digitalization and climate-
change threatening many jobs the Federal Minister for Labour and Social Affairs focuses
on supporting times of STW to qualify the employees affected.
• Ever since 2019 Germany offers support for further professional education, if the job of an
employee is threatened to be substituted by technology or is otherwise affected by
transformation.
• The course must meet certain requirements concerning the quality of the entity offering the
course and the course itself.
• The scale of the support depends on the size of the establishment of the employer and
includes the costs of the course as well as the wage payable for the time of the course.
• In order to enhance this purpose the Bundestag just passed a law specifically
strengthening and widening the support of qualifications during STW. This law makes the
use of STW for further education much more flexible in order to use times of workloss
during the pandemic to prepare for the challenges of transformation.
USING STW FOR FURTHER VOCATIONAL EDUCATION AND TRAINING
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PROPORTION OF ESTABLISHMENTS USING SHORT-TIME
WORK DURING THE COVID-19-PANDEMIC (IN PERCENT)
Source: Aminia et al. (2020) based on the IAB-Employer Survey “Establishments during the Covid-19 crisis“ 9
March-
August
August September October difference
(1) (2) (3) (4) (4) – (1)
manufacturing 40 33 33 34 -6
construction 13 9 9 11 -2
trade and repair 43 24 22 21 -22
transportation and
storage
37 31 29 26 -11
hotels and restaurants 63 40 38 35 -28
other services 32 21 16 19 -13
education, medical and
welfare services
38 23 18 20 -18
total 35 22 20 21 -14

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ESTABLISHMENTS‘ EXPECTATIONS CONCERNING SHORT-TIME
WORK (UNTIL THE END OF 2020, IN PERCENT)
Source: Aminia et al. (2020) based on the IAB-Employer Survey “Establishments during the Covid-19 crisis“ 5-19 October 2020 (Basis: Establishments with short-time
work during the 2nd and 3rd week of October 2020, N=392
10
13%
9%
71%
7%
extention reduction no change unknown

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ESTABLISHMENTS‘ EXPECTATIONS CONCERNING SHORT-TIME
WORK (UNTIL THE END OF 2020, IN PERCENT)
Source: Aminia et al. (2020) based on the IAB-Employer Survey “Establishments during the Covid-19 crisis“ 5-19 October 2020 (Basis: Establishments without short-time
work during the 2nd and 3rd week of October 2020, N=1395).
11
yes
84%
no
10%
unknown
6%

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• By introducing timely limited alterations to rules on STW Germany saved jobs and
avoided an extraordinary rise in unemployment.
• The prolongation of these alleviations is customized by reducing the
reimbursement of social insurance contributions and the limit for supplementary
earnings
• Skills development during STW was made more attractive for the employers.
• Using innovative data about the establishments’ reactions during the COVID-19-
crisis we demonstrated that a substantial proportion of establishments have
finished STW adoption or plan to do so.
CONCLUSIONS
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13. CONTACT
Lutz.Bellmann@iab.de
Anke.Jenckel@bmas.bund.de